Franklin Templeton Finds Two Market Timing
Problems

December 22, 2003 (PLANSPONSOR.com) - Franklin
Resources' internal probe of potential trading abuses has
pinpointed instances of frequent trading in shares of certain
funds by two current or former employees in their personal
401(k) accounts.

According to information the
San Mateo, California-based investment manager
revealed in its newly filed annual report and in a
statement
on its Web site, t
he individuals include one trader and one officer of
its funds, Dow Jones reported. Both employees have been
placed on administrative leave and the officer has resigned
from his position with the funds.

The company also said it hasn’t found any instances
of inappropriate trading by any portfolio manager,
investment analyst or officer and hasn’t identified any
late-trading problems. Its investigation isn’t complete,
however, the company admitted. Franklin Resources
oversees the Franklin and Templeton fund families.

State and federal regulators have been pursuing a
wide-ranging investigation over the last several months
that has focused in large part on allegations of market
timing and late trading abuses.

The company said it is also responding to requests
for similar kinds of information from regulatory
authorities in some of the foreign countries where the
company conducts its global asset management business.
Franklin Templeton said it has been asked to furnish both
documents and testimony in connection with a
US Securities and Exchange Commission
private investigation that resulted in a legal action
against Morgan Stanley.

Franklin Resources said the information involves
its arrangements to compensate brokers who sell fund
shares. As of November 28, the company decided to cut off
relationships with brokerages where the allocation is
based on sale of fund shares in order to satisfy
preferred list or other shelf-space arrangements.

Franklin Templeton also revealed in its
annual
report
that its units have been named in three lawsuits alleging
breach of fiduciary duty with respect to the valuation of
the portfolio securities of certain of its funds. The
suits filed in October and November name the Templeton
Funds, Templeton Global Advisors Ltd., Templeton Global
Smaller Companies Fund Inc. and Templeton Investment
Counsel. One suit also names the Templeton World
Fund.

.

The company said it believes the claims made in
each of the lawsuits are without merit and said it
intends to vigorously defend against them.

More Subpoenas

Also in the company’s annual filing was word that the
investigation into Franklin Templeton is apparently
expanding.

Two months after revealing it had been hit with
subpoenas from the SEC and New York State Attorney General
Eliot Spitzer, the company disclosed that it has received
more information requests. The new requests were from
t
he US Attorney for the Northern District of
California, the US Attorney for the District of
Massachusetts and certain foreign regulatory bodies.

Franklin Templeton said the company and certain
current and former executives and employees have gotten
requests for information and subpoenas to testify or
produce documents – requests with which Franklin
Templeton said it is complying.

As of September 30, Franklin Resources had $301.9
billion in assets under management, up from $287 billion
as of June 30.